Forensic Accounting Report


This report reviews the financial statements of 5 Chinese internet stocks on 15 accounting issues. It flags where the companies have manipulated the presentation of their performance. 

The stocks are:




Meituan Dianping


A separate report on Alibaba only is also available


What’s inside?

Accounting issues covered include

1.     general sense of aggression vs. conservatism

2.     use of investment gains to flatter profits

3.     carrying value of unlisted subsidiaries and associates

4.     discretionary consolidation or deconsolidation of associates

5.     use of non-GAAP metrics in an aggressive way potentially to mislead

6.     inflation of revenue, GMV or profits

7.     revenue recognition of intangible/digital item sales

8.     capitalization of questionable assets 

9.     amortization policies

10.  impairment approach

11.  general obfuscation and complexity without adequate explanation

12.  appropriateness and conservatism of accounting policies 

13.  accounting for stock-based compensation

14.  audit fees, auditor, and related issues 

15.  related party transactions – disclosure, appropriateness and fairness

16.  sources and uses of cash

The report is comprehensive, as you would expect, and has 70 pages of detailed analysis, produced from over 40 man days of research by a team of experienced equity analysts and accounting experts. This report is not produced from a standardised scoring system which will tell you the Beneish M-Score but not what the company is actually doing. Our analysts have done a line by line forensic examination of the companies’ balance sheets, profits and losses, and cash flow statements. 

Our analysts have pored through literally thousands of pages of annual reports from these five companies to give you a granular view of 

  • how they are presenting their financial performance 

  • to what extent that is flattered by aggressive accounting and 

  • to what degree governance issues raise question marks.

And this is an important sector – we estimate that this group in the last five years has invested nearly 3 TRILLION RMB in the Chinese internet eco-system! The group generated less than half that in operating cash flow in the same period – quite a gap, and we explain how it was filled in the report.

It was originally produced for a household name institutional investor (which paid a multiple of the price we are now charging, tens of thousands). They said:

It’s great, and I think will be extremely useful.

I loved it. Thanks a lot.

A much better outcome for us than we have had in similar [commissions] using less specialised providers.

The conclusions of this report are likely to be quite shocking to some shareholders.

For more information, please email Steve. 

The full report costs just $5000, a fraction of the original price, and this includes up to 1 hour of consultation time for questions if required. Existing clients of Behind the Balance Sheet get a 20% discount. A report on Alibaba only is also available for just $2000.

Additional disclaimer, for the avoidance of doubt: Please note that this report is not intended to be investment advice. We have only assessed the companies’ financial reporting under the above headings and we have drawn no conclusions on the attractions or otherwise of these companies as investments. Do your own research and by all means use our conclusions as one input into your research process, but our work is intended to be on the companies and not the stocks.